SREITs

Discussion in 'Acquistion Targets' started by zuolun, Mar 20, 2013.


Draft saved Draft deleted
  1. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    "Learn to take losses. The most important thing in making money is not letting losses get out of hand" — Marty Schwartz

    CapitalMallAsiaA Complex H&S Breakout; TP 1.56

    CapitalMallAsia closed with a spinning top @ 1.92 (-0.03, -1.5%) with extremely high vol. done at 13.3m shares on 31 May 2013.

    Immediate resistance @ 1.945, immediate support @ 1.91, the 200d SMA.

    [​IMG]

     
    Last edited: Jun 2, 2013
  2. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    You hit the nail on the head; blue chips and funds-favourite SREITS are racing to the bottom.

    Performance Chart: "sword" stocks as at 31 May 2013

    [​IMG]

    Performance Chart: SREITs as at 31 May 2013

    [​IMG]

     
  3. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    AHTBearish Bollinger Band Breakout

    AHT has a hammer @ 0.89 (-0.035, -3.8%) with extremely high vol. done at 5.88m shares on 31 May 2013 at 11.36am.

    Immediate support @ 0.88, immediate resistance @ 0.905.

    [​IMG]

    Ascendas Hospitality to raise S$200m for hotel buy

    31 May 2013

    SINGAPORE — Ascendas Hospitality Trust plans to raise at least S$200 million in a private placement and sale of preference shares to help fund the purchase of the Park Hotel Clarke Quay.

    The offer by the trust’s managers includes a private placement of 161.9 million stapled securities at an issue price between S$0.885 and S$0.915 to raise at least S$143.3 million, the company said yesterday. It will also offer 64.4 million new stapled securities — on the basis of two for every 25 units held in Ascendas Hospitality Trust — at between S$0.880 and S$0.905 to raise no less than S$56.7 million. It agreed last month to buy the Park Hotel for S$300 million, adding to the trust’s portfolio of 10 hotels spread across Australia, China and Japan.
     
  4. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    满江红 :hammer:

    SREITs as at 29 May 2013
    [​IMG]

    SREITs as at 23 May 2013 at 12.36pm
    [​IMG]

     
  5. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    满江红 :hammer:

    SREITs as at 29 May 2013
    [​IMG]

    SREITs as at 23 May 2013 at 12.36pm
    [​IMG]
     
  6. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    CapitalMallSupported by the 100d SMA @ 2.17

    CapitalMall closed with a long black marubozu @ 2.17 (-0.13, -5.7%) with extremely high vol. done at 20.2m shares on 23 May 2013.

    Immediate resistance @ 2.22, the 50d SMA, immediate support @ 2.13, crucial support @ 2.08, the 200d SMA.

    [​IMG]

    [​IMG]

     
  7. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    CapitalMallSupported by the 100d SMA @ 2.17

    CapitalMall closed with a long black marubozu @ 2.17 (-0.13, -5.7%) with extremely high vol. done at 20.2m shares on 23 May 2013.

    Immediate resistance @ 2.22, the 50d SMA, immediate support @ 2.13, crucial support @ 2.08, the 200d SMA.

    [​IMG]
     
    Last edited: May 26, 2013
  8. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    CambridgeFat Finger Error; in Chinese it's known as 震仓...The purpose is to shake out the weak holders. :laugh:

    Cambridge closed with a long-legged hammer @ 0.805 (-0.04, -4.7%) on 23 May 2013.

    Immediate resistance @ 0.845, immediate support @ 0.805, next support @ 0.78.

    [​IMG]

    [​IMG]
    [​IMG]
     
  9. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    满江红 :hammer:

    SREITs as at 23 May 2013 at 12.36pm
    [​IMG]

    SREITs as at 23 May 2013 at 11.50am
    [​IMG]
     
  10. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    nottibird,

    Big kartek CKs made a concerted effort to whack down S-REITs.

    Singapore REITs: Time For Some Caution? - April 26, 2013 ~~ Singapore-listed REITs have had a very strong run, delivering a 27.6% return since our last update. We relook valuations in the sector and highlight some implications should interest rates begin to normalise.

    SREITs as at 23 May 2013 at 11.50am
    [​IMG]

    Fed Maps Exit From Stimulus

    Timing of Wind-Down Is Uncertain, but Focus Is on Managing Unpredictable Market Expectations

    By JON HILSENRATH
    May 11, 2013, 11:16 a.m. ET

    Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy—an effort to preserve flexibility and manage highly unpredictable market expectations.

    Officials say they plan to reduce the amount of bonds they buy in careful and potentially halting steps, varying their purchases as their confidence about the job market and inflation evolves. The timing on when to start is still being debated.

    The Fed's strategy for how and when to wind down the program is of intense interest in financial markets. While the strategy being debated leaves the Fed plenty of flexibility, it might not be the clear and steady path markets expect based on past experience.

    Officials are focusing on clarifying the strategy so markets don't overreact about their next moves. For example, officials want to avoid creating expectations that their retreat will be a steady, uniform process like their approach from 2003 to 2006, when they raised short-term interest rates in a series of quarter-percentage-point increments over 17 straight policy meetings.

    "I don't want to go from wild turkey to cold turkey," Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an interview Friday. "I think we ought to dial it back." Mr. Fisher is part of a contingent of Fed hawks who are wary of the central bank's easy-money policies.

    Stocks and bond markets have taken off since the Fed announced in September that it would ramp up the bond-buying program, and major indexes closed at another record Friday. An abrupt or surprising end to it could send stocks and bonds in the other direction, but a delayed end could allow markets to overheat. And some officials feel they've ended other programs too soon and don't want to repeat the mistake.

    The Fed's strategy on how to unwind the program has emerged as a source of some uncertainty in markets in the wake of its policy meeting earlier this month. The Fed said in its postmeeting statement that it was "prepared to increase or reduce the pace of its purchases" as the economic outlook evolved.

    The suggestion that the Fed might boost its bond buying was a change in the policy statement that seemed to some an acknowledgment that more aid for the economy might be needed. Employment data in April were weak and inflation has fallen well below the Fed's 2% inflation objective, both points that allow leeway for more stimulus.

    But many officials believe the recovery is on track and aren't yet concerned about the inflation slowdown. Instead, the most recent statement seems more aimed at signaling the Fed's broader flexibility in managing the programs.

    Charles Plosser, president of the Philadelphia Fed, said in an interview Friday that the change in the statement was meant "to remind everybody" that the Fed has "a dial that can move either way."

    The dial can also pause. Fed officials could shrink the size of their purchases and hold it at that level for a while as they assess the effects, or they could make several moves in a row if that seemed right. They could also boost their buying if they lose confidence about the economic outlook. The strategy is meant in part to ensure flexibility in an uncertain economy.

    Yet while officials appear increasingly settled on a strategy for how to dial back the program, they haven't decided when to start.

    Mr. Fisher said he advocated starting right away at the last Fed meeting. Some officials can envision taking a first step this summer, if strong data show the economy is weathering the tax increases and federal spending cuts that appear to be weighing on growth. But they might wait longer, especially if the economy disappoints, as it has for several years during the spring and summer months.

    A Wall Street Journal survey of private economists this week showed that 55% expect the Fed to start shrinking its bond purchases in the third or fourth quarter this year, while 45% expect the Fed to wait until next year or later. None expected the Fed to increase its purchases as its next step.

    The bond-buying programs are aimed at pushing down long-term interest rates and boosting financial markets to encourage more borrowing, spending and hiring in the broader economy. The Fed's securities holdings have increased from $2.58 trillion to $3.04 trillion since September.

    Clearer signals about the Fed's plans could emerge next week. Five regional Fed bank presidents, including Mr. Fisher and Mr. Plosser, and Fed governor Sarah Bloom Raskin are scheduled to speak. Fed Chairman Ben Bernanke will discuss economic prospects for the long-run in a commencement address at Bard College at Simon's Rock next Saturday.

    Central bank officials want to see substantial improvements in the job-market outlook before the programs are ended all together. And then, efforts to boost short-term interest rates might not occur for months or even years later.

    The unemployment rate has fallen to 7.5% from 8.1% since August, both because of hiring and people leaving the workforce. Payroll employment has increased on average by 193,000 per month during the eight months since the program was launched, compared with average gains of 157,000 before it began. "It is pretty hard to say we haven't seen an improvement in the labor market," Mr. Plosser said.

    Many economists believe economic growth will slow in the second quarter—in part because of fiscal drags—from a 2.5% annualized rate in the first quarter, but then accelerate in the second half. If growth remains firm in the weeks ahead that could give officials more confidence about starting to pull back.

    Fed officials aren't very concerned about the annual rate of inflation falling toward 1% in recent months, well below their 2% objective. Because expectations of future inflation have remained steady, many Fed officials expect inflation readings to move back up toward 2% in the second half of the year. "I'm not too worried about it," Mr. Plosser said. "Expectations remain pretty stable."

    The Fed has policy meetings in June, July and September, and Mr. Bernanke will have a chance to explain its actions at news conferences in June and September.

    Some of the bond-buying program's most vocal proponents have signaled more optimism about the outlook and a willingness to consider pulling back from the programs. John Williams, president of the Federal Reserve Bank of San Francisco, said in an interview last month that he anticipated pulling back this summer.

    "I'm looking for continuing signs of improvement in the economy," he said, "sustained, ongoing improvement in the economy."
     
    Last edited: May 23, 2013
  11. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    4 threats Keppel must watch out for after REIT sell off

    21 May 2013

    It sold down its stake to 51.5%.

    According to Barclays, Keppel Corp announced today it had sold down its stake in KREIT to 51.5% from 58.2% previously, through the placement of 180mn units in KREIT.

    This follows earlier steps to reduce its holdings in the company through the sale of 75mn units in February 2013 and a dividend-in-specie awarded to shareholders at its AGM. The sale of 180mn units last night at S$1.555 per unit was priced at a discount of 2.8% to KREIT’s closing price of S$1.60 on 20 May 2013.

    Barclays noted that key risks include:

    1) yields may not be sustainable if prime office rents do not recover above guaranteed levels after expiry of income support, especially for OFC (35% of assets) beyond Dec 2016;

    2) KREIT has the highest gearing in the sector at 43.3%;

    3) 51% of its tenant base is in the financial services industry, making it vulnerable to any cyclical downturn in this sector; and

    4) potential fund-raising needs for the MBFC 2 acquisition, albeit this could be a double-edged sword.

    Here's more:

    We initiated on KREIT on 6 May 2013 (see Keppel REIT: Initiate at OW; for keeps), with a PT of S$1.70, as we expected it to benefit from a prime office upturn, and expect distributions/ sell-down of Keppel Corp’s stake to raise its otherwise small free float and thus investability.

    The latter has partly panned out. Post the most recent 1-for-5 distribution-in-specie exercise, Keppel Corp still had a 12.3% stake in KREIT. Keppel Corp placed out a 6.7% stake last night, reducing this stake to 5.6%, and conversely raising KREIT’s free float to 48.5% from 41.8%.

    This will push KREIT from the eighth largest free float market cap SREIT to the fifth largest. We expect trading volumes and hence liquidity to continue to improve.

    Should this be sustained, we would expect the potential inclusion of KREIT in well-followed indices such as MSCI Singapore and NAREIT indices.
    With the recent outperformance, its yields have compressed to 5.0%. We believe there is still upside potential. Our PT suggests forward yields of 4.7-4.8% and a yield spread of 3.3% which is reasonable for a premium office landlord in our view.

    We think further share price catalysts for KREIT include: acquisition of the 33% stake in MBFC 2 (1.3mn sqft 100% stake, cS$1.1bn attributable value, 16% of KREIT’s assets) from its parent, Keppel Land, in the next 12 months will solidify its number 1 office REIT position in Singapore.​
     
  12. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    MITHot Stock Alert for nottibird

    MIT has a spinning top @ 1.53 (-0.015, -1%) on 21 May 2013 at 2.15pm.

    Immediate resistance @ 1.56, immediate support @ 1.52, next support @ 1.495.

    [​IMG]

    [​IMG]
     
  13. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    Time to real on retail Reits, and S-Reits generally?

    Jan 2010 to May 2013

    [​IMG]

    Reits alone not to blame for retail woes

    By Ong Chor Hao
    13 May 2013

    [SINGAPORE] Real estate investment trusts (Reits) in the retail sector are often blamed for pushing up rentals and consumer prices, but market watchers say it's not such a straightforward situation. And retail Reits may face challenges of their own going forward.

    Some retailers have highlighted the problem rising rentals pose to businesses, especially the smaller ones. At the recent World Retail Congress Asia Pacific, reports cited the Singapore Retailers Association (SRA) noting a growing Reit market as one of the factors behind the higher rentals.

    Reits generally have strong pricing power because they own most of the prime malls in Singapore, Alan Cheong, head of research at Savills Singapore said. "The profit maximisation motive is driving them to try to max out the yields for the shareholders. And then they will be very tough on their end of the bargaining table against the retailers."

    In return for securing a prime spot, retailers have to accept the trade-off.

    "So of course if I'm the Reit I can always say you can vote with your feet if you don't like my rent, you can move out," he said.

    R Dhinakaran, managing director of the Jay Gee Melwani Group and SRA vice-president, said Reit investors are expecting increasing returns despite a "literally unchanged underlying physical asset".

    For retailers, the higher rents do not bring about "significant or commensurate increase of traffic of consumers", he said.

    Retailers have tried as much as possible to contain prices, even in the face of rising costs, because they know that they operate in a highly competitive market, said Lau Chuen Wei, executive director at SRA.

    "Unfortunately, there's always the straw that breaks the camel's back, and there will come a time when price increases will be inevitable, just so the business can continue to survive, and retailers will have to pass on some of these costs to the consumers in the form of higher prices."

    Associate Professor Sing Tien Foo of the department of real estate at the National University of Singapore (NUS) said that retail malls under Reits can also tend to bring in the same tenants for their malls.

    This is due to their negotiating power in getting them to take up space across different malls, which can squeeze out some smaller players.

    But he said there is "no clear evidence" whether an overall increase in rents since Reits were introduced was caused by the trusts or were simply due to market demand. He also believes the relationship between retailers and Reits to be more symbiotic than it appears.

    Some rental structures comprise a base fee plus a variable component derived from a percentage of turnover, he noted, which can spread out the risk for both tenants and landlords.

    Png Poh Soon, head of research and consultancy at Knight Frank Singapore, estimates that some 40 per cent of retail rents in Singapore are structured this way.

    He said rents have been going up whether or not the shopping centres are owned by Reits, as all landlords chase profits.

    "They are all landlords, landlords want to make money. I haven't seen a landlord that says I can rent to you at X dollars but doesn't raise rents in the next few years."

    The considerations for tenants should not be whether or not the mall in question is owned by a Reit, but the location, track record of the mall and whether marketing efforts are run well, Mr Png said.

    Here's where the financial clout and experience of Reits can be leveraged on, NUS' Prof Sing said, for example in doing promotions or upgrading facilities.

    Knight Frank's Mr Png said Reits can also grow distribution per unit (DPU) in other ways, through acquisitions or organic growth.

    "So raising rents is just one tool that they can use for the distribution per unit."

    For now, analysts are fairly upbeat about the retail Reit sector, but some have urged caution.

    Ong Kian Lin, an analyst with Maybank Kim Eng, wrote in a note dated March 22 that the recent S-Reit rally was not due to strong fundamentals but fuelled by inflated asset values from quantitative easing by the US Federal Reserve and ample liquidity.

    He noted how retail and office property prices have gone up but rentals have been slow to catch up.

    A Colliers International report reflected this divergence. As at the end of the first quarter of 2013, retail property rents in its areas of study have fallen from the previous quarter while capital values went up.

    While maintaining a positive outlook for the retail and retail Reit sector, Savills' Mr Cheong noted signs of trouble in that retail sales figures are trailing growth in areas such as tourist arrivals, population and inflation.

    Retail sales fell 2.7 per cent in February. Tourist arrivals last year was 9.1 per cent higher than the year before. The consumer price index rose 3.5 per cent in February from a year ago. Total population growth was 2.5 per cent between 2011 and 2012.

    The demand seen in the market right now is due to sentiment still being buoyant, Mr Cheong feels.

    "At the moment it's still rising, but it's a binary issue. You cannot go and push to the tipping point, you push to the tipping point, everybody will bolt for the door like a fire in a cinema or retail mall. If everyone bolts for the door, everything will be vacated."

    NUS' Prof Sing said retailers have increasing choices of malls. And the risk is that with greater choice, consumers may drift away from traditionally popular malls, leading to a downward spiral.

    "When this happens, tenants will also start to move out. This cycle will continue, because you (as a manager) cannot pull in the crowd, I (as a retailer) cannot afford to pay such a high rent, I have to move out from the mall. So you put in another tenant that is not as good, so fewer people will come."

    Prof Sing and Knight Frank's Mr Png said they are watching the Jurong East area, with several commercial and retail developments due for completion.

    Retailers also have to cope with tighter foreign manpower policies.

    "Much as the government would like to talk about productivity you find that retailers, the services business, is still very labour intensive," Mr Png said.

    Ultimately it is near impossible to balance the interests of the various parties, SRA's Ms Lau believes. Investors will want higher returns; workers will want higher wages; consumers will protest higher prices.

    "We need to realise that for every option that we exercise, there must be consequences and we cannot always have our cake and eat it too."
     
    Last edited: May 18, 2013
  14. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    AscottREITUptrend intact

    AscottREIT closed with a gravestone doji @ 1.405 (-0.005, -0.4%) on 3 May 2013.

    Immediate resistance @ 1.41, immediate support @ 1.39, next support @ 1.37.

    [​IMG]

    [​IMG]

    [​IMG]
     
  15. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    CapitaCommUptrend intact

    CapitaComm closed with a long black marubozu @ 1.70 (-0.02, -1.2%) on 3 May 2013.

    Immediate resistance @ 1.745, immediate support @ 1.695, next support @ 1.67.

    [​IMG]

    [​IMG]

    [​IMG]
     
  16. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    DBS Vickers:

    Hoteliers
    1. CDL Hospitality Trust
    2. Far East Hospitality Trust
    3. Ascott REIT
    4. Global Premium Hotels

    Singapore Hotel Statistics (JanFeb13) : Weak numbers but
    expected


    24 Apr 2013

    We note that Singapore Tourism Board (STB) has
    released the latest available hotel statistics for
    Feb13. While it seems fairly dated, it does gives us
    an insight into the trends to be reported by the
    hospitality players in the coming days.

    Singapore Tourism Board statistics indicate a weak
    start to 1Q13: Luxury hotels are the worst hit.

    Industry room revenue was S$427.8m, which was a
    7.2% drop y-o-y. Occupancy rates remained fairly
    stable at 84-86% but average daily rates (ADRs)
    were weaker at c.2.7% y-o-y at S$252.2/night.
    RevPAR was 3.1% lower y-o-y at S$215/night.

    Occupancy rates remained fairly firm but
    performance on a sub-sector basis varies, with the
    luxury hotels seeing the largest drop in RevPARs (up
    to -14% y-o-y) while the other sub-segments
    (midtier, upscale and economy) hotels showing more
    resilience (RevPAR performance range between -
    3% to -1% fall y-o-y). We note that the most
    resilient sub-segments were the mid-tier and
    economy hotels which saw marginal weakness on a
    y-o-y basis.

    We will like to highlight that this is not unexpected
    and hoteliers in the previous results season back in
    Jan13 had given indication of weaker operational
    trends at the start of 2013 and we have been
    anticipating a weak start to the year. We believe the
    operational weakness seen in the first two months of
    2013 was due to (i) the longer break owing to the
    festive Chinese Lunar New Year (CNY) being in
    Feb13 ( vs Jan12 ) which resulted in corporate
    travellers delaying their business trips till after the
    festive period, (ii) a strong start in 2012 "distorting"
    the y-o-y performance due to a strong line-up of
    conferences and events, especially the Singapore
    Airshow , held in Feb12, helped to boost
    accommodation demand a year back, (iii) the strong
    S$; travellers have remained more conscious on their
    choices of hotels and have been "trading down" to
    cheaper accommodation choices.

    In an attempt to remove the effects of the seasonal
    impact due to the festive period, we compare the
    performance of the first two months of 2011 (note that
    CNY was also in Feb) and noted that the hotel sector's
    performance remained stronger with most sub-sectors
    seeing higher RevPARs to the tune of 0-12%.

    What does it mean for hoteliers' results

    This suggests that hoteliers (CDL Hospitality Trust, Far
    East Hospitality Trust, Ascott REIT, Global Premium
    Hotels) that are due to report their first quarter results in
    the coming days aren't likely to show good results.
    However, we believe this should already be expected by
    the market given the fairly clear guidance by various
    management teams back in Jan13. We believe that a
    more important datapoint to watch out for is whether
    there is a recovery in accommodation demand post the
    festive period, which seems to be the case, based on our
    conversations with the various hoteliers.

    Nevertheless, while most hospitality S-REITs are expected
    to see weaker y-o-y results, we believe that the weaker
    operational performance of CDL Hospitality Trust
    (CDREIT)'s Singapore hotels will be buffered by
    contribution of Angsana Velavaru (acquired at a yield of
    close to c.10% and completed in Jan13).
     
  17. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    K-GreenUptrend Broken; expect more downside

    A correction of 20% from the last peak @ 1.125 to 0.895 signifies that K-Green has entered bear market territory.

    A bullish break above 1.125 signifies the continuation of wave-3, hence wave-4 and wave-5 will be negated.

    [​IMG]

    [​IMG]
     
    Last edited: Apr 28, 2013
  18. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    A-REITBig monkey and his followers run road :hammer:

    [​IMG]
     
  19. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    Regulators Worry Mortgage REITs Pose Threat to Financial System

    By DEBORAH SOLOMON
    April 19, 2013, 9:53 a.m. ET

    WASHINGTON — A panel of top financial regulators is targeting mortgage real-estate investment trusts as a potential risk to the U.S. financial system, the latest example of Washington's growing concern with market bubbles.

    Next week, the Financial Stability Oversight Council, a panel comprising the top U.S. financial regulators, is expected to cite mortgage REITs as a source of market vulnerability in its annual report, according to people familiar with the matter, a distinction that could set the stage for stricter oversight of the industry.

    Eager to avoid the mistakes of the past, regulators are attempting to identify overly frothy activity before it poses problems. Even though the economy continues to recover only slowly, regulators see potential bubbles forming in a range of financial markets, in part because of the Federal Reserve's easy-money policies, which have driven interest rates to near-record lows and prompted investors to seek higher returns elsewhere.

    Mortgage REITs, which are publicly traded financial companies that borrow funds to invest in real-estate debt, have seen their assets quadruple to more than $400 billion since 2009. They differ from traditional REITs in that they invest in mortgage debt, rather than actual real-estate like office buildings or shopping malls. The firms take advantage of inexpensive, short-term borrowing to buy mortgage securities backed by Fannie Mae and Freddie Mac, and offer returns to investors of as much as 15%.

    They join leveraged loans and money-market mutual funds as areas of risk cited by officials. Three Federal Reserve officials have singled out mortgage REITs in recent weeks, saying the industry merits watching.

    Calvin Schnure, vice president of research and industry information at the National Association of Real Estate Investment Trusts, said that rather than a source of instability, mortgage REITs have been essential to the housing recovery.

    [​IMG]

    "Mortgage REITs have tripled their holdings of agency mortgages over the past couple of years because their access to public markets positions them to put new capital into the housing market," said Mr. Schnure.

    The heightened scrutiny stems from the growth of such companies as Annaly Capital Management Inc. and American Capital Agency Corp., whose assets have ballooned to more than $100 billion apiece over the past three years. The market capitalization of the industry has grown over the past three years from $22.1 billion to $59 billion, according to KBW Research.

    "Mortgage REITs are bigger today, but they are bigger by virtue of an increased capital base," said Wellington J. Denahan, chairman and CEO of Annaly Capital. "Many of us have operated through challenging markets, including the financial crisis, and we continue to support and are helping to implement the regulatory changes that are being put in place to make the markets safer for all participants. This low-rate environment poses risks that investors in every market must be prudent about managing. In general, the mortgage REIT sector does so through a range of hedging tools, like interest-rate swaps, reducing leverage and conservative balance-sheet management activities."

    The recipe behind their rapid growth is raising red flags in Washington, where regulators worry about the REITs' exposure to interest-rate spikes, reliance on leverage and short-term funding agreements that can dry up in times of crisis.

    The companies take advantage of low interest rates to buy longer-term mortgage-backed debt with inexpensive debt. They then pledge those securities as collateral to secure additional short-term funding, or leverage, to boost returns. The companies make money on the difference between the low interest rate they pay on their debt and the higher rate paid on their mortgage assets. One reason regulators are worried is the REITs finance their holdings with very cheap short-term debt which they have to newly secure on a regular basis.

    "Some of these companies are getting really big and there's a lot of interconnectedness between them and large investment banks," said Mark DeVries, U.S. consumer-finance analyst with Barclays PLC. "The Fed has been concerned about any large financial company with leverage relying on wholesale financing."

    The companies have acknowledged in filings the risks inherent in their business but say they are protected against much of the downside.

    The firms say they use interest-rate swaps to hedge against rate swings and have raised more than $30 billion in equity over the past two years.

    "I'm not convinced there's a big problem because these REITs are holding relatively liquid securities and represent a modest part of the mortgage market," said Stijn Van Nieuwerburgh, director of New York University's Stern Center for real estate finance research. Mr. Van Nieuwerburgh said the biggest risk is a sudden spike in interest rates, which would "torpedo the value of these mortgages" and hamper the firms' ability to repay loans.

    As they ponder the risks, regulators must also weigh the impact of action, such as drying up one of the only sources of private-sector capital for housing.

    The FSOC's labeling of mortgage REITs as a source of risk doesn't mandate changes but could set the stage for stricter oversight of the firms, which aren't subject to the capital standards or leverage limits that large banks face.

    The Securities and Exchange Commission, whose chairman is an FSOC member, could opt to regulate mortgage REITs under the Investment Company Act, or the FSOC could designate an individual firm as a "systemically important financial institution," subjecting it to heightened capital standards and Fed oversight.

    Fed officials have warned recently about the deterioration in underwriting standards for some corporate loans, and William Dudley, president of the Federal Reserve Bank of New York, recently cited mortgage REITs as an area deserving of "ongoing attention."

    "There is a focus internally on trying to identify vulnerabilities early, before they become a problem," said Nellie Liang, director of the Fed's Office of Financial Stability Policy and Research.

    Regulators are becoming more outspoken in part to help deflate bubbles by sending a word of caution to market participants who may be dismissing risks in order to keep up with other investors.
     
  20. zuolun

    zuolun Well-Known Member

    Joined:
    Sep 12, 2012
    Messages:
    9,934
    Likes Received:
    0
    K-GreenUptrend broken with exceptional high volume; expect more downside

    [​IMG][/URL]
     

Share This Page